Monetary policy operations
The Bank of Russia conducts its monetary policy operations in order to attain the operational target.
To achieve the primary objective of monetary policy — that is price stability — the Bank of Russia sets the operational target of monetary policy — bringing money market overnight rates close to the key rate.
The Bank of Russia achieves the operational target by implementing the adopted general approaches to managing the banking sector liquidity and money market rates with the system of monetary policy instruments (Monetary Policy Operating Framework). The latter consists of reserve requirements, intraday loans, auctions to absorb or provide liquidity, interest rate corridor.
The Bank of Russia conducts auctions to absorb or provide liquidity with the benchmark allotment established based on liquidity forecast. The purpose of the auctions is to align the actual balances on current accounts of banks with their need in funds to maintain required reserves (for the banking sector as a whole).
In these circumstances, the interest rate corridor with bounds set by the rates on overnight “symmetric” standing facilities not only limits the range of fluctuations in money market rates, but also helps bring them closer to the key rate.